Evening Report | September 6, 2024

Top stories for Sept. 6, 2024

Pro Farmer's Evening Report
Pro Farmer’s Evening Report
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Your Pro Farmer newsletter is now available... Corn and soybean crop condition ratings slipped a little more at the beginning of September, but both continued to signal record yield potential. Our News page 4 feature this week takes a look at what the hefty supplies could mean for the 2024-25 balance sheets ahead of USDA’s Crop Production and Supply & Demand Reports on Sept. 12. While markets are trying to find demand to chew through the ample supplies, USDA’s ag trade update showed a record monthly deficit for July. The updated farm income forecast isn’t nearly as bleak as USDA’s original projections in February, but the new outlook would still mark the largest two-year drop in net farm income and net cash farm income after they reached record levels in 2022. Given low crops prices, weak ag trade and declining farm income, we take a look at what economists say are several key indicators that can signal a recession in the U.S. agriculture sector. On a positive note, China has ramped up purchases of U.S. soybeans and more purchases could be coming, driven by improving crush margins. We cover all of these items and much more in this week’s newsletter, which you can access here.

World Weather: River levels unlikely to improve much this month... Low waters on the lower Mississippi River are impacting barge traffic, causing reduced drafts and tows and shipping delays. That has caused barge rates to spike. With big corn and soybean crops soon to hit the market, the logistics snarl and higher freight rates suggest basis is likely to widen across the eastern Corn Belt and areas of the western Belt near the Mississippi River.

World Weather Inc. believes shipping restrictions are unlikely to be relaxed for quite a while given the expected rainfall pattern for the balance of September. The fall outlook doesn’t call for an abundance of rains either. As a result, there is little reason to expect river levels to increase significantly across the Midwest during the next 30 days. The Missouri River has the best potential for a minor rise, but the Ohio and upper Mississippi rivers are unlikely to see much of an increase in runoff – not only this month but probably not during the remainder of fall or early winter either.

Potential farm bill implications from USDA’s farm income forecast... Direct government payments to farmers in 2024 are projected to be the lowest since 1982 in inflation-adjusted terms. Lawmakers will use this as justification for making changes in the farmer safety net programs like ARC and PLC.

Payrolls shy of expectations again... The U.S. economy added 142,000 non-farm payrolls in August, up sharply from the downwardly revised figure of 89,000 for July. However, that was shy of expectations and the lowest August figure since 2017. Beyond health care, government and social assistance, hiring — especially for white-collar jobs — has mostly stalled.

Fed officials say it’s time to start cutting interest rates... Federal Reserve policymakers said they are ready to lower interest rates at the U.S. central bank’s meeting in two weeks.

“It is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate,” New York Fed President John Williams said at a Council on Foreign Relations event, though by how much and at what pace, he added, is still undetermined.

Fed Governor Christopher Waller, speaking at the University of Notre Dame, said: “If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings. If the data suggests the need for larger cuts, then I will support that as well. I was a big advocate of front-loading rate hikes when inflation accelerated in 2022, and I will be an advocate of front-loading rate cuts if that is appropriate.”

Chicago Fed President Austan Goolsbee said central bankers need to lower rates to keep the labor market from weakening too much. He noted, “I think it raises some serious questions, not just about this meeting but about the next several months. How do we make sure... to not have things turn into something worse, that’s the critical challenge facing the Fed in my view. I do basically think... in past cycles when things slow down the conditions warrant multiple moves, not just a single one.”

Markets are somewhat torn on whether the Fed will cut interest rates 25 or 50 basis points following its Sept. 17-18 monetary policy meeting, though the highest odds are with a smaller reduction to start.

Former PBOC chief urges China to tackle deflationary pressures... Former People’s Bank of China (PBOC) Governor Yi Gang has called for urgent measures to combat deflation, warning that falling prices threaten China’s economic recovery. Speaking at the Bund Summit in Shanghai, Yi emphasized the need to turn the GDP deflator positive, as the broad price measure has been negative for several quarters. His remarks highlight growing concerns over weak domestic demand and the need for proactive fiscal and accommodative monetary policies to stabilize the economy.

World recorded hottest summer ever... This summer was the hottest ever in the Northern Hemisphere. The European Union’s Copernicus Climate Change Service reported that for June to August, global temperatures were 0.69C above historical averages, beating the previous high set last year. In Europe, the heat over the June to August period was 1.54°C above the 1991-2020 average, according to Copernicus. The most extreme conditions were recorded in the Mediterranean region and Eastern Europe, while the UK, Iceland, parts of Ireland, the west coast of Portugal and southern Norway were cooler than the norm. China’s weather authority said the nation had its hottest summer since records began in 1961.

Over the past 12 months, the global average temperature was 1.64C higher than pre-industrial levels, above the 1.5C threshold scientists say threatens life on the planet.